The passage of the Financial Services and Markets Act 2023 brings for all of us a great opportunity.
The FCA and other regulators have been given the ability to get down to the details of what a UK financial services rulebook outside of the EU is going to look like – and we want to do that with your involvement.
In summary, how we regulate - the very building blocks of how we do what we do - is being refined and expanded as a result of this Act.
The 2023 Act puts in place an enhanced framework for us in making all of our rules. This includes a new secondary objective (PDF) on international competitiveness and growth, and new accountability and scrutiny arrangements such as an enhanced duty to keep our rules under review – which we’re already consulting on – and a new duty to consult a new panel on our preparation of cost benefit analyses.
The 2023 Act also allows the repeal of the 'retained EU legislation' (REUL) in financial services that the UK inherited. This means that we can now write new rules more suitable for UK markets and consumers. But we're not simply going to rip everything up and start again. There will be some areas that will require changes because we know they're not working well for the UK, and we're excited about bringing forward changes to make those parts of our markets work better.
But there are other aspects of the regime we inherited from the EU, developed during the UK’s membership, that continue to work well. So, mindful of the amount and pace of change that regulated firms and market participants can absorb, we won’t try to change everything all at once.
This is what I, my team and my colleagues across the FCA have been tasked with: how do we make sure that we go through that longlist of retained EU legislation efficiently, carefully and consistently? How do we balance the welcome opportunity to tailor the UK’s regulatory regime properly to our unique markets, and the potential burden of change and disruption to industry? And how do we make sure that, at the end of this process, we have a set of Handbook rules that support the UK in being a respected and pre-eminent global financial centre?
A joint approach
We have several thousand pages of REUL legislation to get through. Multiple teams here have been thinking about what is working, and what isn’t, and where we may be able to adapt. We've been working closely with The Treasury and the Prudential Regulation Authority (PRA) to plan for a smooth transfer, and collectively we need to deliver a Government statute book, a PRA Rulebook and a FCA Handbook that all support and interface well with each other.
Now more than ever, we're committed to excellent engagement with our stakeholders, not least financial services firms and the consumers they serve, to ensure meaningful involvement and consultation on the changes we propose. You’ll see us engaging earlier, through a whole range of channels, both formal and informal, to seek to get your views, to ensure we make the right decisions for the UK. Please take every opportunity to share your views to help shape the future of financial services regulation in the UK.
Clear rules and guidance
In addition, to help ensure consistency and drive good outcomes, we want to ensure that our Handbook is clear and accessible. Our overall aims for the Handbook are to: have clear rules, reduce regulatory burdens where appropriate, and enhance accessibility.
To achieve this, we will be applying the following principles:
- bringing together regulatory provisions so that the Handbook becomes a 'one-stop shop'
- using the existing structures in the Handbook where possible, and only creating new sourcebooks where necessary
- relying on existing requirements as much as possible
- considering outcomes-based regulation, where appropriate
- seeking to reduce complexity by drafting in our Handbook format and style where we can, and aiming to align standards addressing similar issues across files where possible
In some cases, we may need to take a different approach in the short term. For example, if we need to replace REUL to address an emerging harm, or to manage the overall pace of the process. But, over time, our approach to replacing REUL will be based on these principles.
What you can expect to see
We remain committed to telling you as much as we can as early as we can. We'll keep our website updated with the individual files as we make progress. The Regulatory Initiatives Grid, which we publish alongside our regulatory colleagues, will also include an overview of the reforms happening across the sector.
We want to be consistent, and we want to deliver a Handbook that means we can address emerging harms and adapt to changes more quickly. We want a regulatory framework that protects consumers, supports thriving markets, and can adapt in a more agile way to the future evolution of the sector. And we want, over time, to bring greater simplicity, coherence and consistency to both our Handbook and to our regulatory approach. I look forward to working with you all to deliver that change.